The reason the skin colors don't intermingle is probably because the actual skin colors are separate. If a red and a blue sim have a baby, there's no chance of having a purple sim since the base color simply doesn't exist. However, the darkness slider bar makes for an infinite range of tones in that particular color.
So obviously, when the child is born or conceived (depending on when that's actually decided), the game selects one of the two colors for the baby. Then it picks a spot on the slider somewhere between the darkness settings of both parents. The real question is: how far back does the genetics go, and how are traits passed on. Of course, I'm talking a little beyond skin color, here.
Here's two examples of things I've noticed:
One of my first sims had the blue skin color with the tone about half way in the middle. Her hair was a base of red with purple roots and green highlights and tips. I can't remember what color her eyes were. She married someone in Sunset Valley (it might have been Cyclone Sword), and they had 3 children. The first one looked almost exactly like her. The second one had lighter blue skin with brown hair, and the third had a normal skin tone with her horror-story hair (lol). The first and second were girls, so due to household number considerations, they both had children with townies without getting married, while the youngest brought a wife into the household after the parents died. Each had one offspring: The eldest had a child with normal skin and the hair color, the middle had a blue skinned child with just the red from the grandmothers hair (the root, highlights and tips were red, too), while the youngest had a child with normal skin and hair. Due to a catastrophic computer problem, it didn't get much farther than that.
Shortly after I got Riverview, I made a sim that looked like me and put him in the town. I (he) married Laurel Grisby after she aged up to adult. The two sims were very similar in all respects, except for Laurel Grisby's gigantic nose and ears. Laurel's not unattractive with a little makeup and a new hairstyle, but that nose and those ears big (and I digress, as usual). It was 6 generations before there was child born who didn't have that nose. The ears were gone after the second. And believe me: I made sure that marriages didn't contribute to it after the first generation lol.
I'm sure that it's random for the most part, and thus there's no way to predict the outcome. But it would be nice to know how many generations back the genetics go, and to what extent.
